Circular No. 12/2020

Clarifications in respect of prescribed electronic modes under section 269SU of the income tax act 1961

What this is

Circular No. 12/2020 was issued by the Central Board of Direct Taxes on 20 May 2020. Its subject is Clarifications in respect of prescribed electronic modes under section 269SU of the income tax act 1961.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Takes purely business-to-business specified persons out of section 269SU. Section 269SU, inserted by the Finance (No. 2) Act, 2019, requires every person carrying on business with sales, turnover or gross receipts of more than rupees fifty crores in the immediately preceding previous year to provide facilities for accepting payment through the prescribed electronic modes, which Notification No. 105/2019 dated 30 December 2019 fixed as RuPay debit card, UPI (BHIM-UPI) and UPI QR code (BHIM-UPI QR code). The Board clarifies that section 269SU does not apply to a specified person having only business-to-business transactions, that is, no transaction with a retail customer or consumer, provided at least 95 per cent of the aggregate of all amounts received during the previous year, including for sales, turnover or gross receipts, is received otherwise than in cash.

Why it was issued

Representations said the prescribed modes are meant for business-to-consumer trade, carry per-transaction and per-day limits, and are of little use to business-to-business concerns that receive large payments by NEFT or RTGS, so the mandate was administrative inconvenience and added cost.

Who it reaches

Wholesalers, manufacturers and traders above the rupees fifty crores turnover mark selling only to other businesses
Specified persons already served with a section 271DB penalty notice for not installing the facility
Businesses with a mixed counter and trade sales, who fall outside the relief

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.269SU	s.187

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it.

F.No.370 142135/20 19-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
****
CircularNo. \ 7- /2020
Dated: May, 2020
Subject: Clarifications in respect of prescribed electronic modes under section 269SU of
thcIncome-tax Act, 1961 - reg.

In furtherance to the declared policy objective of the Government to encourage digital
transactionsand move towards a less-cash economy, a new provision namely Section 269SU was
inserted in the [ncome-tax Act, 1961 ("the Act"), vide the Finance (No.2) Act 2019. This
sectionrequiresevery person carrying on business and having sa les/turnover/gross receipts from
business of more than Rs 50 Crores ("s pecified person") in the immed iately preceding previous
yeartomandatorily provide facilities for accepting payments through prescribed electronic modes.
Subsequently vide notification no. 105/2019 dated 30.12.20 19 (i) Debit Card powered by RuPay;
(ii) Unified Payments Interface (UPI) (BH IM-UPI); and (iii) Unifi ed Payments Interface Quick
Response Code (UPI QR Code) (BHIM-UPI QR Code) were notified as prescribed electronic
modes.

2. Representations have been received statingthat the above requirement of mandatory
facility for payments through the prescribed electronic modes isgen erally applicablein B2C
(Business to Consumer) businesscs, which directly deal with retail customers. Moreover, since
the prescribed electronic modes have a maximum payment limit per transaction or pcr day they
are not so relevant to B2B (Business to Business) businesses, which generally receive large
payments through other electronic modes of payment such as NEFr or RTGS. Mandating such
businesses to provide the facility for accepting payments through prescribed electronic modes
wou ld cause administrative inconvenience and impose additional costs.

3. In view of the above, it is hereby clarified that the provisions of section 269SU of the Act
shall not be applicable to a specified person having on ly B2B transaction s (i.e. no transaction
with retail customer/consumer) if at least 95% of aggregate of all amounts received during the
previous year, including amount received for sales, turnover or gross receipts, are l b mo
other than cash.

&JJ..'
(~.., l ----
Under Secretary to the Govt. of India

Copy to:
'}li , OS, 1Al1Al
t. PS to FM/ OSD to FMI PS to MoS(F)/ OSD to MoS(F)
2. PPS to Secretary (Revenue)
3. Chairman, CBDT & All Members. CBDT
4. All PI'. DGsIT/ Pr. CslT
5. All 10int Secretaries! CslTI Directors! Deputy Secretaries/ Under Secretaries of CBDT
6. The C&AG of India
7. The JS & Legal Adviser, Ministry of Law & Justice, New Delhi
8. CIT (M&TP), Official Spokesperson ofCBDT
9. 0 /0 Pr. DGfT (Systems) for uploading on officia l website
10. leIT (Database Cell) for uploading on www.irsofficcrsonline.gov.in

What to watch

The exemption fails if there is even one transaction with a retail customer or consumer — it is not a mostly-B2B test.
The 95 per cent test is on all amounts received during the previous year, not merely on sales, and the receipts must be otherwise than in cash.
The turnover gate is more than rupees fifty crores in the immediately preceding previous year, so eligibility can change from year to year.
The relief is from providing the facility; it says nothing about section 269ST or any other cash restriction.

Where you meet it

On a penalty notice under section 271DB for failure to provide the prescribed electronic payment facility, where you must show the business is wholly business-to-business and meets the 95 per cent test.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 32/2019 — Clarifications in respect of prescribed electronic modes under section 269SU of the income tax act 1961 30 December 2019
Notification No. 105/2019 [F.No.370142/35/2019-TPL)] /GSR 960(E) — Ministry of Finance 30 December 2019

← Circular No. 13/2020 · Circular No. Cirular No. 11/2020 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.